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America’s greatest global advantage is demographics

But the US needs to keep birthrates up and immigration rising.

Will America or its authoritarian rivals dominate the 21st century? The answer may have as much to do with demography as with policy. Although we often fixate on military spending and GDP as markers of America’s position vis-à-vis China and Russia, a country’s demographic profile critically impacts its ability to generate that wealth and power. And if demography is indeed destiny, America’s geopolitical future looks pretty promising — so long as the country can navigate the dangers the world’s demographic future also holds.

A country’s people are taproot of its power in many respects. A large working-age population serves as a source of military manpower. Far more important, a relatively young, growing and well-educated population is a wellspring of the economic productivity that underlies other forms of international influence. All things equal, countries with healthy demographic profiles can create wealth more easily than their competitors. They can also can direct a larger share of that wealth to geopolitical projects as opposed to pensions and health care.

Countries with unhealthy demographic profiles will find it harder to remain economically competitive as their populations shrink and a smaller number of workers support a larger number of retirees. They will face agonizing guns-versus-butter tradeoffs that make it harder to undertake bold geopolitical ventures. When demographic problems become severe, they can exacerbate social and political strains, leading to crippling instability. And as it happens, America’s competitors are likely to face sharp demographic pressures in the coming decades.

The legacy of China’s one-child policy will be a steadily shrinking population for generations, as the number of Chinese falls from 1.41 billion in 2017 to 1.36 billion in 2050 (according to figures provided by the United Nations), and then falls faster still to perhaps 1 billion by 2100. Meanwhile, China’s retirement-age population will jump starkly, according to statistics compiled by Nicholas Eberstadt of the American Enterprise Institute, from 135 million in 2015 to almost 340 million by 2040, as its working-age population falls by roughly 100 million.

This demographic contraction will place tremendous stress on China’s economy, as old-age costs skyrocket and the number of productive workers shrinks. The slowing of Chinese growth that is already underway will become far more pronounced; Beijing’s debt problem will become worse as social expenditures rise and austerity becomes more politically difficult to pursue. The Chinese government will have fewer resources with which to continue its military buildup and implement major geo-economic projects like the Belt and Road Initiative. Not least, demographic trouble may well foster domestic upheaval, as the shortage of marriage-age females, challenges in providing for the wellbeing of retirees, and tapering off of economic growth test China’s social compact. We are accustomed to thinking of China as a rising power. Yet demographic decline is setting in, with potentially profound consequences.

Russia faces its own problems. Its population is around 144 million today. But due to numerous factors — the lingering demographic damage caused by World War II, low birth rates and levels of immigration, and a relatively short life expectancy — the population may be as small as 119 million by 2050. The working-age population will decline from 60% to less than 50% of the overall population during this same period, compounding Russia’s long-term economic decline. The implications are already becoming clear: Russia will face Hobson’s a choice between pouring scarce resources into old-age pensions and inviting the political tumults that austerity could easily bring. Nuclear weapons and the capacity to create mischief through information warfare will keep Moscow in the game, but Russia’s underlying geopolitical potential will continue bleeding away.

The US looks pretty good in comparison. Thanks to a relatively healthy birth rate and high levels of immigration, the US population is slated to increase from 324 million in 2017 to 390 million in 2050. The retirement of the baby boomers will make America a significantly older society, as the proportion of retirees to working age individuals nearly doubles by 2060. But the overall growth of the population will cushion the effects of this shift, and the stresses America faces should not be nearly as severe as those its rivals confront. As a study by the RAND Corporation concludes, “Barring catastrophe, the United States appears likely to have the demographic and economic resources to remain the world’s indispensable nation through at least 2050.”

If the US can hold its ground vis-à-vis Russia and China over the near- and medium-term, its long-term prospects thus seem quite promising. Yet there are also three demography-related dangers the US will have to address.

First, if America is likely to be in relatively good shape demographically three decades from now, many of its traditional allies will not be. Important partners such as Japan, Germany and many Western European countries will have shrinking, aging populations. Japan in particular: Its population is projected to decline from 127 million in 2017 to 109 million in 2050 and keep falling thereafter. As a result, America’s core alliances will be less of a force-multiplier in the future than they are today. This will place an ever-higher premium on deepening ties with countries such as India, whose population is set to grow from 1.3 billion in 2017 to 1.7 billion by 2050.

Second, America’s demographic future is more fragile than the numbers indicate. Projected increases in population are heavily dependent on one of the country’s hidden underrated advantages: high levels of immigration. But if current trends are any indication, the US could easily squander its demographic advantages by enacting draconian immigration restrictions or simply destroying its image as a country that welcomes ambitious newcomers. Conversely, if the proportion of immigrants continues to rise while the white population shrinks, xenophobia and race-based politics could become more common and more toxic. If the US is to keep its demographic edge, it will have to find ways of reconciling two competing imperatives: refreshing the population through immigration while preserving social and political stability.

Third, the US will face the challenge of dealing with declining — and potentially desperate — rivals. We often think of rising powers as aggressive powers, but declining powers can be more aggressive still. History is full of examples of countries, such as Germany in the run-up to World War I, that decided to take enormous geopolitical risks because they believed that their window of opportunity was closing.

If Chinese and Russian leaders come to believe that their future looks grim, they may act more aggressively in hopes of achieving gains while they still have the ability to do so. This dynamic could make crises involving Taiwan, the Baltic states, and other hotspots more likely — and more dangerous. American policy makers will therefore need to maintain the military and other strengths necessary to deter revisionist actions, while also avoiding unnecessarily provocative behaviour that puts Moscow and Beijing in “now or never” situations. Demography may well ultimately help the US win its competitions with China and Russia, but it may also make those rivalries increasingly fraught along the way.

© 2019 Bloomberg L.P

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Population + skills = Good
Population – skills = bad

Very simple to understand, hey SA?

Demographics? You must be joking!

America’s greatest advantage has got nothing to do with demographics. The USA enjoys the “exorbitant privilege” of printing the world’s reserve currency. Every nation that holds US Dollars as reserves, lend money to American citizens at depressed interest rates that are determined by Americans. As the issuer of the international reserve currency, America enjoys the further exorbitant privilege to export its inflation to every nation that uses dollars as reserves. The right to print the reserve currency gives America the right to exploit the shared resource like in the “Tragedy of the commons”. The USA internalizes the benefits and externalizes the costs.

Wherever you find the economic situation described as “The tragedy of the commons”, the total depletion and eventual collapse of the shared resource is inevitable.

The Bretton Woods agreement gave America the right to print money like there is no tomorrow and to export the negative consequences to the rest of the world, while they keep the positive effects to themselves.

There is nothing special about American demographics. America is “great” because the rest of the world supports them by financing their lifestyle and by taking over their financial problems. Even Venezuela would be great if they enjoyed these same privileges.

Very good comment bobsmith!

Yeah, if one read this article, it seems like demographic growth is seen in a positive light. Hence in Japan, Europe, Russia, China shrinking population thus bad for pensions & future economic prospects.

That leaves us with Mzansi! Our explosive population growth must thus be a GOOD thing, according to article??

(Oops, I noticed the words “…growing and well-educated population is a wellspring of the economic productivity”. That is what SA is missing.)

India: huge population growth. Does is mean future economic prosperity OR if there is little econ growth, it means sharing the same wealth amongst more people? That why economic growth is so important.

SA can’t have econ growth…because Eskom is already running at full tilt 🙁

Nice assessment. Your take on China’s future sounds like the current picture of the EU.

There is another thing about the USA (apart from the dollar as the reserve currency as Sensei points out) and that is their intense creativity and sophistication in innovation: Microsoft, Apple, Google and lots more in pharmaceuticals and finance. Compare their registered patents against the rest of the world.

The other thing challenging China is that they have a billion more people on about the same size of land as the USA. So, Africa beckons!

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